UK factories see inventories up, exports down, as Brexit nears – PMI

The approach of Brexit was felt in Britain’s factories in November as companies stocked up on parts to counter any border delays and exports suffered a rare back-to-back fall, a survey showed on Monday.

The IHS Markit/CIPS Manufacturing Purchasing Managers’ Index (PMI) rose to 53.1 from 51.1 in October, its weakest reading since the Brexit referendum.

Although the index proved stronger than all the forecasts in a Reuters poll of economists, it was still one of the lowest since voters decided to leave the European Union in June 2016.

Stock-building, as well as new product launches, helped new orders to grow after a rare contraction in October.

Many manufacturers are building up inventories of parts to protect themselves against the risks of customs delays at the border when Britain leaves the EU on March 29.

A separate survey published overnight by a manufacturers group also found that British companies were increasing their inventory levels while demand for exports fell.

Prime Minister Theresa May risks seeing the Brexit plan she agreed with other EU leaders — which includes a transition period to ease Britain out of the bloc — being rejected by parliament in a vote on Dec. 11.

IHS Markit said new export business dropped for a second month in a row in November, the first back-to-back contraction since early 2016, and companies reported Brexit uncertainty as one of the main reasons behind the fall.

Optimism among manufacturers dipped to a 27-month low.

IHS Markit director Rob Dobson said the survey suggested manufacturing output risked shrinking in the fourth quarter of 2018 unless there is a bounce-back in December.

Britain’s economy has slowed since the Brexit referendum in 2016 but not by as much as many forecasters predicted at the time of the vote. Last week the Bank of England and the finance ministry said that under any Brexit scenario the economy would grow more slowly than if Britain stayed in the EU.